The corporate tax rate in the United States is 35%. After deductions and loopholes are used the tax rate that most corporations pay is only 14%. Corporate profits after taxes are taken out are at an all time high. The effective tax rate that these corporations are paying is at 1979 levels. Corporations have deferred much of their profits abroad to the extent that $2.5 “TRILLION” now sit offshore untaxed! Paul Ryan’s “Better Way” tax reform intends to grow the economy by arguing that corporate tax cuts will result in companies expanding resulting in more jobs. This is foolish thinking as these corporations are awash in cash from 20 years of huge profits. They have all of the money on hand that they need to expand their companies. They will simply pocket the tax cuts and increase their wealth as there is no increased demand that would warrant expansion.
Ryan’s tax proposal would have 76% of the benefits go to the top 1% in the first year and by year 10 nearly 100% of the tax cuts end up with the top 1% .Ryan claims that corporate tax cuts will spur economic growth by encouraging investment. Economic theory and data however indicates that the cuts would benefit a small number of high income capital owners while low and middle income workers would continue to see hourly pay lag far behind the rising income inequality.
If Ryan truly wants to spur economic growth a lump sum tax cut shared equally for all income earners would result in benefits for the lower 60 % of American households 10 times larger than Ryan’s plan and would result in tax cuts for the top 1% that were 99 per cent smaller. Currently our economy remains below full employment as aggregate demand [spending by households, businesses and governments] is too low for companies to add employees. Only by getting more money into the hands of consumers will we increase demand as corporate tax rate cuts are passed through to shareholders not the public who does the consumption needed to increase demand.
To reform corporate tax policy to benefit the vast majority of Americans, not just those at the top, we should be closing the loopholes that have eroded the corporate income tax base so that the corporate sector is paying their appropriate share of taxes based on their historically high profits and low taxes over the past 25 years!